Fraud Examination
5th Edition
ISBN: 9781305079144
Author: W. Steve Albrecht, Chad O. Albrecht, Conan C. Albrecht, Mark F. Zimbelman
Publisher: Cengage Learning
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Question
Chapter 12, Problem 8SC
To determine
The following independent cases as symptoms of fraud or not.
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Case 8 Decide whether each situation is or is not a symptom of revenue fraud. Then explain (1) why the situation isor is not a symptom and (2) if it is a symptom, how itwould be found using computer queries or traditionalmethods. YIN Sales discounts appear too high. YIN Accounts receivable increases as a percentage of revenues. YIN Bad debt allowance increasesby the same percentageas accounts receivable. YIN Increase in sales returns. YIN Large percent of revenues recorded in thefourth quarter. YIN Unexplained reconciling items on the bankstatement.
1______weather the accounts receivable bookkeeper is prohibited from handling cash?
3_____the ratio of cost of goods sold to sales and compare the ratio to previous years?
4____the sales journal and ------- the total to the general ledger
5_____the sales journal, looking for large and unusual transactions requiring investigation.
7_____all marketable securities as of the balance sheet date to determine whetherthey equal the total on the client's list
8_____the balance in the bank account directly with the East State Bank
9_____a sample of duplicate sales invoices to determine if the controller's approval is included and-------each duplicate sales invoice to the sales journal for agreement of name and amount.
Which one of the following statements concerning bad debt expenses is correct?
Select one:
a.
When you write off an accounts receivable, you debit bad debt expense and credit accounts receivable.
b.
You record bad debt expense when individual accounts receivable becomes uncollectible.
c.
Under the percentage of receivables method, bad debt expense is the year-end receivables multiplied by the % of uncollectible accounts.
d.
When the allowance method is used, bad debt expense is recorded before the accounts are written off.
Chapter 12 Solutions
Fraud Examination
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- Which of the following best represents a positive product of a lower number of days sales in receivables ratio? A. collection of receivables is quick, and cash can be used for other business expenditures B. collection of receivables is slow, keeping cash secured to receivables C. credit extension is lenient D. the lender only lends to the top 10% of potential creditorsarrow_forwardWhich of the following statements is correct? Select one: a. Account receivable turnover is equal to net credit sales divided by average net accounts receivable. b. Buying aged receivables from businesses and then collects the payments directly from the customers is called Allowance for uncollectible accounts. c. Auto generated document numbers is a fraud preventive method which is more efficient than physical controls. d. If the same people are responsible for a series of related accounting activities is called Segregation of Duties.arrow_forward27 [Question text] Which of the following statements is FALSE? Select one: A. One method used to monitor the collections of accounts receivable is the aging schedule. B. The key to maintaining control over collection of accounts receivable is that the probability of default increases with the age of the account. C. Accounts receivable is an asset that reflects sales made on credit. D. Since the 2 percent discount is so small, terms of credit such as 2/10 net 30 do not have much impact on accounts receivable management.arrow_forward
- An auditor discovers that a client’s accounts receivable turnover is substantially lowerfor the current year than for the prior year. This trend may indicate that(1) the client recently tightened its credit-granting policies.(2) employees have stolen inventory just before year-end.(3) fictitious credit sales have been recorded during the year.(4) an employee has been lapping receivables in both years.arrow_forward73. Which of the following situation will decrease both receipts and disbursement in the book proof of cash?I. Collection of customers account was recorded higher by P10,000 and corrected in the same period.II. Disbursements of check payment to supplier was recorded higher by P5,000 and corrected in the same period.III. Disbursements of check payment to supplier was recorded lower by P5,000 and corrected in the same period. Group of answer choices III only Both I and III Both I and II II only Both II and III I onlyarrow_forward1. As an accountant, why you need to study the revenue cycle? 2. If you are going to audit the cash receipts cycle, what are the things you need to prepare? 3. Some large businesses have adopted Invoiceless pricing for business-to-business transactions. What do you think are the barriers, if any, to its use in sales to consumers? 4. How could an employee embezzle funds by issuing an unauthorized sales credit memo if the appropriate segregation of duties and authorization controls were not in place?arrow_forward
- The official receipt reports a higher amount of cash collected while the corresponding sales invoice being paid reported a lower amount. What possible type of fraud occurred in this case? Group of answer choices a.Not given among the given choices b.Tax fraud c.Lapping d.Abstraction of collectionarrow_forwarda. The Stealem Co. uses the percentage of receivable method to estimate bad debts and maintains an allowance account to reduce accounts receivable to their net realizable value. An aging of accounts receivable produced the following analysis:Probable % of non-collectionNot yet due………………………………………………… $ 175,000 1%1-30 days past due………………………………………… 90,000 4%31-60 days past due……………………………………….. 40,000 10%61-90 days past due……………………………………….. 10,000 30%Over 90 days past due…………………………………….. 15,000 50%Total $330,000 Prior to adjustment the Allowance for Bad Debts account had a $6,300 credit balance. Instructions:1. Compute the estimated amount of receivables that will not be collected based on aging. 2. Prepare the adjusting journal entry need to record bad debt expense and bring theallowance account to the correct balance. 3. If Stealem used the percentage of sales method to estimate bad debts and it is assumedthe 2% of the sales would be uncollectible. Prepare the journal entry if sales…arrow_forward5 While preparing the bank reconciliation for March, the accountant for Bertran Industries discovered that a $649 check in payment of an account payable had been entered incorrectly in the journal as $694. Which of the following is true? Multiple Choice An adjusting entry must be made to debit Cash and credit Accounts Payable for $45. An adjusting entry must be made to debit Accounts Payable and credit Cash for $45. The bank should be notified, and the bank should correct its records by adding $45 to the company's account. No entry is needed for the reconciling item because it appears on the bank's side of the reconciliation.arrow_forward
- 1. During the preparation of a bank reconciliation, the assistant controller discovered that the Bank incorrectly recorded a $3290 check as $329. The controller has decided not to notify the bank but wait for the bank to detect the error. The controller plans to record the $2961 error as "Other Income" if the Bank fails to detect the error within the next three months. Please discuss whether the controller is behaving in an ethical manner. 2. How are cash equivalents reported in the financial statements? Please list two examples of cash equivalents.arrow_forward38 Assume that Arkan Majan International LLC sold goods to its customer on credit for OMR 2500 and received notes receivables for the same amount. The customer directly deposited the amount of OMR2500 in company bank account that the company unaware. The company received the bank statement in which OMR 2500 is showing more as compared to company’s cash book balance. Therefore while preparing the Bank Reconciliation statement, what adjustment the accountant will do? Choose the correct answer from the following given options. a. Add OMR2500 to the bank statement balance b. Add OMR2500 to the cash book balance c. Less OMR2500 from the cash book balance d. Less OMR2500 from the bank statement balance Clear my choicearrow_forward
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